No indictments in Oklahoma Health Department investigation

Thursday

May 17, 2018 at 7:56 PM

Attorney General Mike Hunter released a scathing 32-page report from the multicounty grand jury that followed a six-month investigation into financial problems at the agency.

OKLAHOMA CITY — Financial operations at the Oklahoma State Department of the Health were so badly bungled that nearly 200 employees lost their jobs unnecessarily, but none of the mismanagement resulted in criminal indictments, Attorney General Mike Hunter announced on Thursday.

Hunter released a scathing 32-page report from the multicounty grand jury that followed a six-month investigation into financial problems at the agency.

The grand jury report and a performance audit conducted by state auditors revealed the agency was never insolvent and that a $30 million emergency appropriation from the Legislature wasn't necessary and still hasn't been spent.

Investigators also determined the agency maintained a "slush fund" by manipulating federal and state funds that allowed the financial mismanagement to continue for years.

The investigation revealed a "system of deceit, abuse, mismanagement and utter incompetence that are so egregious it is hard, if not impossible, to comprehend the rationale behind some of the decisions that were made," Hunter said.

Once the financial mismanagement came to the public's attention in the fall of 2017, and after several top officials at the agency had resigned, Gov. Mary Fallin's former top finance official, Preston Doerflinger, was tapped to head the agency.

But Doerflinger compounded the problem by pushing forward with a plan to lay off 198 agency employees and seek $30 million in emergency funding without waiting for the results of the audit, the grand jury reported.

Doerflinger, who resigned in February after four months on the job following accusations of domestic violence, didn't immediately return a telephone message seeking comment. But in a statement emailed to The Associated Press, he said the decision to proceed with the layoffs and seek emergency funding was made at the request of the agency's top finance officials, "and both of them were steadfast in their assertion that the agency had a bleak financial outlook."

Department of Health spokesman Tony Sellars declined to comment Thursday until agency officials had time to thoroughly read the audit and grand jury report.

Hunter said a new management team at the department is conducting an overview of all agency operations, including staffing levels.

"Once that review is done, there needs to be decision making around which of those 198 employees need to be rehired," Hunter said.

The investigative audit also revealed the agency's estimate of $10 million in savings from the layoffs was overstated by between $2 million and $5 million.

Among the recommendations of the grand jury was that the unspent $30 million emergency appropriation be rescinded and used by the Legislature to conduct additional performance audits of state agencies.

The grand jury investigation began shortly after the resignation of former Oklahoma Health Commissioner Terry Cline. Cline stepped down in October after the state Board of Health accused him of mismanaging the department's finances. His chief deputy, Julie Cox-Kain, also resigned.

Read the report from the multicounty grand jury and the special investigative audit (pdf).